Question 6 (7 points) [7 marks] For the following question, . You get 2 marks for choosing the correct answer. . You can get up
Question 6 (7 points)
[7 marks] For the following question,
. You get 2 marks for choosing the correct answer.
. You can get up to 5 marks for detailed solutions
An economy has two people, Adam and Betty. There are two goods, good x and good
y. Adam has an initial endowment of 12 units of x and 12 units of y. Betty has an
initial endowment of 24 units of x and 6 units of y. Adam’s utility function is
U (Xa, )a) = Xaya, Where x. is his good x consumption and y. is his good y
consumption. Betty’s utility function is U (xb, yb) = xby , where x, and y, are her good
x and good y consumption, respectively. At every Pareto optimal allocation,
(a)Adam consumes more good y per good x than Betty does.
(b) Betty consumes equal numbers of good x and good y.
(c) Adam consumes the same number of good x as Betty.
(d) Adam consumes 18 units of x for every 9 units of y that he consumes.
(e) Betty consumes 12 units of x for every 3 units of y that she consumes.
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